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How to Boost Your Business with a Powerful Tool!

Every now and then you come across tool or a process that provides a ton of value in a simple and effective package. This tool or process is easy to understand, easy to integrate into your existing systems, and it provides an extraordinary level of value to you and your business.

The Tool

I originally built this tool as a method to track project health when I was responsible for overseeing a large portfolio of projects. It is a simple little graph that tells you right away if your project managers really understand their projects and if their projects are going to meet the organization’s financial expectations.

So, what is it and how does it work?

The EAC – ITD chart is an Excel based graph that you can either export data into or you can build into a larger business system. It consists of only nine parameters, of which only six are actively measured and updated.

The nine parameters are shown in the following screenshot and defined below from a project management perspective:

As Sold Cost – this is the total cost as per contract including additional CNs, etc.

As Sold Revenue – this is the total revenue agreed to with the customer on all signed contracts, POs and CNs.

As Sold GP $ – this is the difference between the As Sold Revenue and the As Sold Cost

ITD Cost – this is the cumulative cost incurred to date on the project

ITD Revenue – this is the cumulative revenue recognized to date on the project

ITD GP $ – this is the cumulative GP realized to date on the project (the difference between ITD Revenue and ITD Cost)

EAC Cost – this is the projected estimate of the remaining cumulative cost burn rate on the job.

EAC Revenue – this is the projected estimate of the remaining cumulative revenue recognition on the job.

EAC GP $ – this is the projected estimate of the cumulative GP remaining to be recognized (the difference between EAC Revenue and EAC Cost)

Application to Business

In addition to project oversight, I have also been able to effectively leverage this tool into business applications with great results!

For example, I was consulting with a start up business run by college students. They were starting and running a business over a 6-month period. They had well defined revenue and profit targets for this 6-month time. We set the EAC – ITD graph up for them as follows:

As Sold Cost – this is the total business expense they thought they would incur in the 6-month period

As Sold Revenue – this is the total revenue they thought they would invoice for in 6 months

As Sold GP $ – this is their projected business profitability (Revenue – Cost)

ITD Cost – this is the cumulative real cost incurred by the business

ITD Revenue – this is the cumulative revenue earned by the business

ITD GP $ – this is the cumulative profit realized by the business (the difference between ITD Revenue and ITD Cost)

EAC Cost – this is the projected estimate of the cumulative cost for the business. It was originally estimated by dividing the total expected cost over the 6- month period by the number of weeks the business was operating.

EAC Revenue – this is the projected estimate of the cumulative revenue realized for the business. It was originally estimated by dividing the total expected Revenue over the 6-month period by the number of weeks the business was operating

EAC GP $ – this is the projected estimate of the cumulative profit for the business over the 6-month period.

What this allowed the students to see immediately was:

The sales per week required to hit their end of period sales targets

Their expense burn rate at the end of each week

Their cumulative profits at the end of each week

These trends were close to real time and provided a powerful motivator for making sales and reducing unnecessary costs. The students were concerned for a while that they would not hit their sales goal but when the graph showed them that their margins were higher than expected, they were able to reduce their revenue targets and focus more on operational efficiency. At the end of their 6 months they were able to exceed their profitability goal!

Take Action

Set aside some time this week to review the tools and processes that your business uses. Do you have what you need to make effective and timely decisions? What gaps do you have and how can you fill them?

Powerful business tools do not have to cost millions of dollars to purchase and implement. Download the EAC – ITD tool and get started today!

Finally, review these related posts for more ideas on powerful business tools: